The Arkansas Teacher Retirement System would be limited to using or transferring $20 million a year in income-tax credits for recycling equipment in the $1 billion-plus Big River Steel mill near Osceola under legislation that won the endorsement of the Arkansas House's Revenue and Taxation Committee on Thursday.
The system would have possession and control of all tax credits earned on the project under Senate Bill 844 by Sen. David Burnett, D-Osceola.
Each of the project's investors may use or transfer the tax credits under current state law, said Tim Leathers, deputy director of the state Department of Finance and Administration.
The bill requires the system to sell the tax credits to Arkansas for 80 percent of the face value in lieu of the right to claim these credits against any income tax due by a proprietor, partner, member shareholder or beneficiary in the project, the finance department reported.
It changes state law for the income-tax credits for waste reduction, reuse or recycling equipment for qualified projects under Amendment 82 to the Arkansas Constitution, which gives the Arkansas Legislature authority to order the issuance of bonds for economic development purposes.
Two years ago, the Legislature authorized the state to issue $125 million in bonds for the steel mill in its first use of that authority under Amendment 82.
Last year, the trustees for the Arkansas Teacher Retirement System authorized investing up to $125 million in system funds in the steel mill. The teacher system is the largest retirement system in state government, with more than 100,000 working and retired members and more than $14 billion in investments.
"Some concerns came up this year during the session because it was brought to our attention that there was a possibility that they [ the teacher retirement system] could use the entire amount of the tax credit and it would be a $270 million hit to our coffers," said Rep. Monte Hodges, D-Blytheville.
So Hodges said Sen. Jimmy Hickey, R-Texarkana, and "others put their heads together and worked and vetted to put some safeguards in place to make this a better piece of legislation."
Rep. Charlie Collins, R-Fayetteville, said Hickey indicated several weeks ago that he was concerned that "a $250 million to $300 million tax credit could hit the [the state treasury] at any moment" under existing state law.
But SB844 places a limit on the annual use of these income tax credits and determines how a public retirement system uses its tax credits, Collins said.
SB844 "makes me feel much more comfortable about that legislation that we passed last time because these were the kinds of things I, too, was concerned about," said Collins.
Hodges said Big River Steel, Republican Gov. Asa Hutchinson, the Arkansas Economic Development Commission and the finance department "made sure that this would be a good deal."
"This proves and shows that [Big River Steel officials] want to be good corporate citizens for the state of Arkansas to agree to do this," Hodges said.
Afterward, system Executive Director George Hopkins said SB844 "is a win for Arkansas, Big River Steel, and ATRS."
"It allows ATRS to sell $20 million of tax credits a year to the state for 80 cents on the dollar for a net of $16 million per year. ATRS will be provided 20 percent of that amount, or $3.2 million a year, for about 14 years for its share of the initial tax credits for Phase I of [Big River Steel]," he said.
"Additional tax credits for Big River Steel will flow the same way over time as expansions occur," Hopkins said.
Metro on 03/27/2015
Print Headline: Panel supports tax-credit bill